What Are Capital Gains?

capital-gains

Capital gains are the profits an investor makes on certain types of investments. Real estate, precious metals, collectibles, bonds, mutual funds, stocks and options are investments for which a person can earn capital gains, according to About.com.

A capital gain results when the investor buys one of the assets included and sells it later for a higher price, explains About.com. Purchasing a home for $150,000 and selling it for $170,000 results in a $20,000 capital gain, for instance. Capital gains are reported on IRS Form 1040 Schedule D when filing a return. Selling an asset for less than the purchase price is a capital loss.